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Europe to America: We Want Your Gas

Nations are forming a coalition with the U.S. energy industry to lobby for more natural-gas exports.

JAKARTA, INDONESIA: A fishing boat sails past a ship tanker of liquefied natural gas (LNG) at a port in Jakarta, 12 December 2005. Indonesia's state oil and gas firm Pertamina has rescheduled next year's exports LNG to Japan, South Korea, Taiwan and other countries due to falling output, a company spokesman said. Pertamina will reschedule the delivery of 61 shipments, 52 from its plant in Bontang, East Kalimantan, and nine from Arun in Aceh in 2006, Pertamina spokesman M. Harun told AFP.

National Journal

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Amy Harder

Jan. 16, 2014, 3:24 p.m.

Cit­ing eco­nom­ic and na­tion­al se­cur­ity woes, more than a dozen European na­tions are ramp­ing up pres­sure on Wash­ing­ton to open wider its fed­er­ally re­stric­ted spig­ot of nat­ur­al-gas ex­ports.

Chart shows what percentage of Europe's natural gas consumption is supplied by Russia.
National Journal

The coun­tries, which primar­ily in­clude East­ern European na­tions heav­ily de­pend­ent upon Rus­sia for their en­ergy sup­plies, are work­ing with a Wash­ing­ton-based gov­ern­ment-af­fairs firm to launch a lob­by­ing co­ali­tion in the next month with Amer­ic­an en­ergy com­pan­ies. Chart shows what per­cent­age of Europe’s nat­ur­al gas con­sump­tion is sup­plied by Rus­sia.

The co­ali­tion, whose name will be LNG Al­lies, will lobby Wash­ing­ton on al­low­ing these coun­tries easi­er ac­cess to nat­ur­al gas from the United States, where sup­plies have bal­looned in re­cent years and do­mest­ic prices have plummeted com­pared with the rest of the world. Right now, fed­er­al law sig­ni­fic­antly re­stricts U.S. com­pan­ies from ex­port­ing nat­ur­al gas to coun­tries that are not free-trade part­ners with United States, which in­cludes Europe.

“These coun­tries are all still very heav­ily de­pend­ent upon Rus­sia, and they’re ex­cited about get­ting in­to the LNG [li­que­fied nat­ur­al gas] mar­ket­place, and are look­ing for not only U.S. gas, but good, sol­id busi­ness re­la­tion­ships,” said the co­ali­tion’s or­gan­izer, who works for the firm launch­ing the co­ali­tion.

This source, who would speak only on the con­di­tion of an­onym­ity since the co­ali­tion has not yet launched, said coun­tries that are likely to be mem­bers of the group in­clude Aus­tria, the Czech Re­pub­lic, Es­to­nia, Fin­land, Latvia, Lithuania, Po­land, Ro­mania, and the Slov­ak Re­pub­lic. These nine coun­tries sent rep­res­ent­at­ives to a meet­ing last month at the Lithuani­an Em­bassy in Wash­ing­ton. Oth­er po­ten­tial mem­bers in­clude Croa­tia, Hun­gary, Slov­e­nia, Sweden, and Greece.

When reached for com­ment about its par­ti­cip­a­tion in the co­ali­tion, an of­fi­cial at the Czech Re­pub­lic Em­bassy said no fi­nal de­cision has been made. “We want to learn more about what this will en­tail, what this will mean and how this will work,” said Mar­tin Pizinger, polit­ic­al and eco­nom­ic of­ficer at the em­bassy.

Si­mo­nas Å atÅ«nas, deputy chief of mis­sion and min­is­ter coun­sel­lor at the Lithuani­an Em­bassy, said the coun­try was likely to join. “We are very strongly con­sid­er­ing and prob­ably will join,” Å atÅ«nas said.

The gov­ern­ment-af­fairs source said more lo­gist­ics and de­tails must still be worked out be­fore some coun­tries con­firm their in­volve­ment.

“We are fairly close to an­noun­cing something pub­licly about the co­ali­tion,” the source said. “It’s a little tricky dip­lo­mat­ic­ally to put to­geth­er an or­gan­iz­a­tion that can al­low em­bassies and their gas com­pan­ies to work with our in­dustry to­geth­er in a leg­al way that doesn’t gen­er­ate im­mense head­aches and pa­per­work.”

Two U.S. trade as­so­ci­ations, Amer­ica’s Nat­ur­al Gas Al­li­ance and the Amer­ic­an Pet­ro­leum In­sti­tute, have not yet com­mit­ted to the ef­fort but are cur­rently dis­cuss­ing it. “We cer­tainly are in­ter­ested in East­ern European mar­kets and we are con­sid­er­ing the best way to work with those coun­tries to bring them Amer­ica’s clean and abund­ant nat­ur­al gas, but we have not yet reached a form­al agree­ment to work with one group or an­oth­er in that en­deavor,” ac­cord­ing to ANGA spokes­man Dan Whit­ten.

The im­petus be­hind this co­ali­tion has been grow­ing over the last year as European coun­tries have been meet­ing more and more with top of­fi­cials in Con­gress and with­in the ad­min­is­tra­tion to ex­plain why Europe wants Amer­ic­an gas so badly.

“We’ve had so many coun­try rep­res­ent­at­ives come in­to the of­fice, plead­ing with us to step up our ef­forts to ex­port LNG,” said Rep. Ed Whit­field, chair­man of the House En­ergy and Com­merce En­ergy and Power Sub­com­mit­tee. “The reas­on why is be­cause the Rus­si­ans have them over the bar­rel and they’re able to ex­tract really high prices from them.”

In pub­lic events throughout Wash­ing­ton in re­cent months and in mul­tiple in­ter­views for this story, of­fi­cials rep­res­ent­ing European coun­tries stressed both the na­tion­al se­cur­ity and eco­nom­ic reas­ons why they want to im­port U.S. nat­ur­al gas.

One Greek mem­ber of the European Uni­on Par­lia­ment, Niki Tzavela, went so far as to say that cheap en­ergy trumps fin­an­cial aid through the In­ter­na­tion­al Mon­et­ary Fund.

“It’s bet­ter if you give us cheap en­ergy than send­ing money through the IMF,” Tzavela said. Cheap nat­ur­al gas would more quickly help the eco­nomy than fin­an­cial aid, she said. Over the past four years, Greece has re­ceived more than $235 bil­lion worth of in­ter­na­tion­al aid through the IMF, of which the U.S. is the biggest share­hold­er, ac­cord­ing to the IMF. The cur­rent gas price in Greece, which is a little more than 50 per­cent de­pend­ent upon Rus­si­an gas, is $17 per mil­lion Brit­ish thermal units. Tzavela says that if the United States made its gas avail­able to Europe, Greece’s gas price would be $7.50, even ac­count­ing for trans­port­a­tion and in­fra­struc­ture costs.

“The en­dgame for us is to break free from the ma­nip­u­la­tion of gas prices ac­cord­ing to the crude-oil in­dex,” said Tzavela, whose party (the Europe of Free­dom and Demo­cracy group) is con­ser­vat­ive by Amer­ic­an stand­ards. “This is what Gazprom has put on Europe.”

A spokes­per­son Gazprom, Rus­sia’s state-owned oil and nat­ur­al-gas com­pany, did not ad­dress the co­ali­tion but in­stead is­sued a broad­er state­ment.

“Gazprom is a re­li­able sup­pli­er of nat­ur­al gas, mak­ing every ef­fort to ful­fill of its con­trac­tu­al ob­lig­a­tions,” Gazprom spokes­wo­man Olga Moreva said in an e-mail. “This provides clar­ity and pre­dict­ab­il­ity of re­la­tions with both European con­sumers and with our closest neigh­bors in the years ahead.”

Moreva in­dic­ated that im­port­ing nat­ur­al gas would not ne­ces­sar­ily lower prices for European na­tions, and could even in­crease prices. “In­vest­ment de­cisions on con­struct­ing LNG ter­min­als are taken on the basis of eco­nom­ic cal­cu­la­tions and feas­ib­il­ity stud­ies, but not on the be­lief that their pres­ence will re­duce gas prices for do­mest­ic con­sumers. In any case, con­struc­tion of LNG ter­min­als should be paid off and, there­fore, someone has to pay for it. In this case it is the end con­sumer.”

Wash­ing­ton of­fi­cials Tzavela has met with in­clude House En­ergy and Com­merce Com­mit­tee Chair­man Fred Up­ton, R-Mich., and En­ergy De­part­ment Deputy Sec­ret­ary Daniel Pone­man. In con­ver­sa­tions with these Wash­ing­ton of­fi­cials and oth­ers, Europe faces chal­lenges rooted in both policy and polit­ics.

The En­ergy De­part­ment has ap­proved five ap­plic­a­tions to ex­port nat­ur­al gas to coun­tries that are not free-trade part­ners with the U.S., but very little if any of the gas is go­ing to European coun­tries (most are go­ing to Asia, where com­pan­ies can fetch high­er prices). More than 20 ap­plic­a­tions are pending be­fore DOE.

The law that re­stricts nat­ur­al-gas ex­ports to coun­tries that are not free-trade part­ners with the U.S., which dates back to 1938, re­quires com­pan­ies seek­ing to ex­port to these coun­tries to go through a lengthy — and in­creas­ingly polit­ic­al — reg­u­lat­ory re­view pro­cess that must de­term­ine wheth­er such ex­ports would be in the coun­try’s best in­terest. The En­ergy De­part­ment gives a more auto­mat­ic ap­prov­al to nat­ur­al-gas ex­ports go­ing to coun­tries that are free-trade part­ners with the U.S.

To that end, the LNG Al­lies co­ali­tion will pur­sue a two-pronged ap­proach to change this cur­rent sys­tem. Coun­tries and com­pan­ies will lobby to en­sure nat­ur­al-gas ex­ports are part of a large free-trade agree­ment, called the Transat­lantic Trade and In­vest­ment Part­ner­ship, which the Obama ad­min­is­tra­tion and the European Uni­on began ne­go­ti­at­ing last sum­mer.

The co­ali­tion will also lobby Con­gress to pass bi­par­tis­an le­gis­la­tion in­tro­duced in both cham­bers that would ex­ped­ite nat­ur­al-gas ex­ports to coun­tries that are mem­bers of the North At­lantic Treaty Or­gan­iz­a­tion, which in­cludes many of the European coun­tries most seek­ing Amer­ica’s gas.

Achiev­ing either or both of these policy ob­ject­ives will re­quire over­com­ing tricky polit­ic­al hurdles, in­clud­ing the con­cern that law­makers should first and fore­most en­sure do­mest­ic en­ergy prices re­main cheap. Some chem­ic­al com­pan­ies, which use nat­ur­al gas in their man­u­fac­tur­ing pro­cesses and be­ne­fit from low prices, are con­cerned that if the coun­try ex­ports too much nat­ur­al gas, the United States could lose its com­pet­it­ive ad­vant­age.

“I hope no one would sug­gest that our over­seas al­lies should be placed high­er in the pri­or­it­iz­a­tion queue than the Amer­ic­an con­sumer,” said Kev­in Kolevar, vice pres­id­ent of gov­ern­ment af­fairs and pub­lic policy at Dow Chem­ic­al.

Tzavela, the mem­ber of the E.U. Par­lia­ment, said she sym­path­ized with this per­spect­ive. “But on the oth­er hand, in the long run, if Europe doesn’t have the con­sum­ing eco­nomy, Amer­ic­an products will lose as well be­cause we will keep re­du­cing our con­sump­tion of those products,” Tzavela said.

“Can’t we get to a point where it’s go­ing to be­ne­fit the United States and it can be­ne­fit our al­lies?” Ry­an asked. “We trade a lot with these coun­tries, we have strong polit­ic­al al­lies with these coun­tries. We’ve got to move away from this: ‘Oh, if it’s good for someone out­side the United States, it must be bad for us.’ “

Rep. John Shimkus, R-Ill., who co­chairs the House Balt­ic Caucus and whose fam­ily her­it­age is Lithuani­an, echoed this sen­ti­ment.

“These coun­tries do everything we ask them on the war on ter­ror, troops in Afgh­anistan, troops in Ir­aq. They’re all for us,” Shimkus said of European coun­tries. “They would drop everything to help us.”

In­deed, that’s the mes­sage European of­fi­cials are try­ing to send.

“We stand for each oth­er on mil­it­ary fronts. Lithuania was the smal­lest coun­try to have its forces in Afgh­anistan. We have our spe­cial forces still fight­ing. They will con­tin­ue fight­ing with you in south Afgh­anistan,” said Zy­gimantas Pa­vil­ionis, Lithuania’s am­bas­sad­or to the U.S. and Mex­ico, at a for­um last fall hos­ted by the House En­ergy and Com­merce Com­mit­tee. “But, we have to fight for each oth­er in the area of new chal­lenges. If we have cuts of sup­plies, if our se­cur­ity is un­der threat, we have to stand for each oth­er. So, LNG is something that would really be­ne­fit the com­mon se­cur­ity of the whole Trans-At­lantic fam­ily.”

The for­um, which was re­l­at­ively sparsely at­ten­ded, had a clear mes­sage, which Pa­vil­ionis summed up in his open­ing re­marks.